Tuesday, June 3, 2014

Vermont’s largest hospital has big plans for South Burlington. Fletcher Allen wants to purchase and develop two parcels for a project that would cost $52 million.

The 92-acre lot off Tilley Drive — which includes the Mountain View Business Park, where the hospital already leases space — and 38 adjacent acres would host Fletcher Allen's outpatient center.

File photo

Spokesman Mike Noble said the proposed project is part of the hospital’s long-term goal of leasing less and buying more. An analysis by White and Burke Real Estate Investment Advisors lists the drawbacks of renting for Fletcher Allen. Among them: private landlords pass on property tax costs to tenants whereas Fletcher Allen — a nonprofit — wouldn’t have to pay property taxes if it owned the parcels.

Demand for outpatient services has grown nationally, and Fletcher Allen expects that trend to continue. Dave Keelty, director of facilities planning and development, described the Burlington Medical Center Campus as a "very finite resource." In other words, they don't have space to expand to meet that demand. Referencing Burlington's rigorous planning and zoning process, White and Burke noted that the constraints to new construction were "political" in addition to "physical" at the site.
Details are scant about precisely what would move where. Fletcher Allen officials say it will be three to five years before that process begins, but the basic idea is to move outpatient services — excluding those that are closely tied to inpatient care — from Burlington’s Medical Center Campus to the South Burlington site.

The hospital has been on the hunt for new property for years, and in 2012 it narrowed down its options to nine sites. It settled on the two South Burlington properties in because it already leases space at one, the land is ripe for new development, and it’s easy for staff and patients to access, according to Keelty.

Why now? Fletcher Allen is looking to lock down into low interest rates while they last, Noble said, and under the proposed agreements, they would recoup the cost of the purchases within 20 years.

It isn't a done deal — getting approval from the Green Mountain Care Board is the first hurdle the hospital has to clear, and Fletcher Allen filed that application Tuesday.

Vermont requires hospitals to apply for a “certificate of need” from the regulatory body as a safeguard to prevent unnecessary spending that could drive up health care costs. It will likely be three to six months before the Green Mountain Care Board makes a decision, Keelty estimated.

The next step is to nail down purchase agreements with the owners.

The White and Burke analysis raises a potential hitch: The undeveloped parcel sits on “prime agricultural soil,” and the state Act 250 regulations require developers to compensate for disturbing such sites. If the state requires that the mitigation be done on the actual site, White and Burke concluded, “that may render the O’Brien site unusable for Fletcher Allen’s purposes.”

Meanwhile, Fletcher Allen is also seeking a permit from Burlington's Development Review Board to build a new inpatient building at the Burlington Medical Center Campus.